Do we have a “housing crisis”?

Across the country housing prices have been going up; and in places like California they’ve been going up significantly. In some areas of California prices are higher than they were pre-mortgage crisis. To be clear, they’ve not been going up because of toxic loan programs seen prior to 2008. Prices have been going up for two main reasons:

Mortgage rates still remain historically low even though the Fed has raised their short term rates 4 times over the last few years (as mentioned in previous posts the Fed does not set mortgage rates).

There is a housing shortage and most will say this is the biggest reason home values have increased over the last 3-4 years.

One other less important reason is people are not moving as much; and if people don’t move there are less homes for sale. So if mortgage rates are low and home values are up why are some people saying we have a housing crisis? They’re saying it because the crisis has to do with not enough affordable homes for sale for home buyers to purchase. It’s not a crisis similar to the mortgage crisis that led to an economic disaster in 2008 and calling it (our current low housing inventory for sale) a crisis is not accurate. Problem yes; crisis no.

What can we do to solve the low inventory problem? Will sky high home loan rates solve the problem? Probably not. Builders simply need build more homes however that is easier said than done. Also people need to start moving again and moving to less populated areas that have plenty of inventory. Only so many people can live in places like San Diego, Los Angeles and San Francisco so the more people move to these cities the higher the values will go.

Solving this problem will take time; not just months but years. Home values can not go up forever and unless wages go up significantly in 2017 home values will most likely level off over the next 6-18 months. Also high home values in urban cities have a way of causing some people to move, in search of more affordable housing and that too will cool the hot housing market.

JB MORTGAGE CAPITAL, INC

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